The Definitive Guide to Scaling Your Business
How To Grow Your Business Without Sacrificing Your Life
A step-by-step guide for business owners that want to experience true growth and time freedom.
From Priceline.com founder Jeff Hoffman and Maui Mastermind CEO David Finkel.
|The information contained is this guide comes from over 20 years of experience building and selling businesses. It will benefit you to stay alert, take notes, and follow the action steps. When applied, these proven principals will change your life and give you time freedom, financial freedom, and piece of mind.|
Day 3: Clarify Your Business Context
Understanding your business context—the map of the market in which you sell, produce, fulfill, and grow your business—is crucial in building a scalable business.
Today we’ll guide you through a simple process to clearly lay out the three dimensions of your business context—your customers, your competition, and your positioning.
When we’re done, you’ll have a clear, concrete picture of your target market, including the critical “Marketing Markers” that will help you qualify and screen for your best buyers.
You’ll also get a simple chart, the Competitive Matrix, to determine how you stack up against your competition in eight key criteria, so that you can narrow your focus to the one or two elements that you need to leverage to effectively compete.
And finally, we’ll give you two powerful tools to help you intentionally craft your market position and brand that work in the stressed-out and resource-strapped world of small business.
Let’s get started with the first dimension of your business context—your customers
Your Customers—Whom You Serve and What They Really Want
As crazy as it seems, most business owners never concretely clarify whom they serve and what this target market really wants.
The average owner is so busy marketing, selling, producing, and fulfilling that they never step back and think through precisely whom they serve, much less the deep aspirations, fears, hopes, dreams, and frustrations of this target market.
This makes about as much sense as the salesperson who spends all day going door to-door selling pool care products—in an apartment complex! When you ask him why he’d waste his time selling a product that clearly this group of people is unlikely to buy, he says, “The doors are so close together that I can call on five times as many people than if I go to the neighborhood you suggest.”
Can you tell us who the ideal target market for your product or service is?
Within that target market, who are your best prospects?
Too many businesses take a broad approach to marketing and claim that “everyone” in their target market can use their product or service.
This is ineffective.
Instead, think of your marketing the way the world’s most successful companies do: as a series of concentric circles. In the middle of the target, the center of the bull’s-eye, are the people who are most likely to use your product now and have the highest closing ratio. If you approach these people, you’ll have the shortest sales cycle. Identifying those “fastest to close” customers in your target market is critical to achieving momentum in growing your sales.
Here is a list of prompts to help you clarify who your target market and ideal customer are by determining what key elements your best customers have in common. While not every question will apply to your business, most will. We encourage you to pause with each item and jot quick notes as you go. The list of prompts will differ if you sell business to business or business to consumer, so choose the applicable list. Follow the cascading series of questions to determine the key elements that ultimately identify who your best buyers likely are, and the target market you’re going to go after (and which tempting markets are distractions you’ll avoid for now).
Clarify Your Target Market
List the key elements that your best buyers have in common:
IF BUSINESS TO BUSINESS:
- Size of customer
- Geographic location of business
- Title of decision maker
- Titles of key influencers in decision process
- Where the decision maker and key influencers spend time (physical locations, online websites, periodicals, events, etc.)
- With whom the decision maker and key influencers already have trusted relationships
IF BUSINESS TO CONSUMER:
- Income level
- Marital status
- Educational level
- Where they live, work, and spend time (passions, affiliations, social networks, media favorites, etc.)
- Who commonly recommends or advises them on purchase decisions for your type of product or service
Your Top Five Marketing Markers:
Given all you’ve reviewed about your target market, which five qualifications are your best clues that you’ve found a great prospect?
Which five elements most reliably predict you’ve found a likely buyer?
These clues are your “Marketing Markers.”
Your goal is to get better at quickly spotting those prospects who are most likely to buy your product or service.
Who Your Target Market Isn’t:
What are the three to five markets that, while tempting, for the time being you are clearly identifying as NOT your current target market?
It’s important to know these markets in order to help your sales/marketing team focus on your target market and not be distracted and pulled off track by pursuing these other markets. You’ll want to revisit your assumptions and decisions on your target market annually, but in your day-to-day marketing, making this decision will help you invest your limited resources where they’ll do the greatest good.
Target Market Tool
You can identify the prospects you should be pursuing by building a profile of your true target customer.
Who is most likely to need your product, understand your sales pitch, and pull out their checkbook now?
Before you go on any sales calls, run potential customers and market segments through this filter and go after only the ones who score high enough to meet your minimum criteria. We call this a “best-first search.”
If you had a crystal ball, you would go to the best customers first and not waste your time on customers who take forever to convince. Our tool can work like this crystal ball, by narrowing your focus to those customers most likely to buy your product or service.
The Marketing Markers you identified a moment ago are the center circle of your prospect target. You’ll use these elements to both target your marketing efforts and be more strategic about where you invest your finite sales energy.
Now that you know who you serve, we need to dive deep into what these prospects really want.
In order to succeed, you need to understand the hopes and aspirations, fears and frustrations, needs and desires that drive and move your target market.
We share a simple tool to help you map out the deep psychological and emotional needs of your target market. To see how this all plays out in real life, we’ve filled out the answers for these questions for David’s company, Maui Mastermind.
While the most important place to start is with your customers, it is essential that you take stock of your competitors too.
Whom do you compete against?
What are their strengths and weaknesses?
How can you best position yourself and your products and services relative to them?
Answering these questions will highlight strategic opportunities for you to seize.
Three Types Of Competitors
You have three types of competitors, two of whom you likely haven’t given much thought to. We’ll explore all three types of competitors, then look at a simple tool that will help you compare your company—side by side—with your top competitors.
Your Direct Competitors
Generally, when you think of competition, your direct competitors come to mind first. Direct competitors are those companies that are actively in the same market you are in, selling a comparable product or service. For example, Sasha Ablitt owns a dry- cleaning business in Santa Barbara, California, that she has built into the most successful dry cleaner in the area. Her direct competitors include more than a dozen other dry cleaners in her area. Identify your top three direct competitors. What are their top strengths, weaknesses, pricing structure, and market share? This is the minimum information you need to get a good handle on who your direct competitors are and how you can effectively compete against them.
Your Indirect Competitors
How else does your target market satisfy their needs with respect to the problem your product or service solves other than with your or your direct competitors’ solution? We call these competing solutions your “indirect” competitors. Going back to Sasha’s dry-cleaning business, her indirect competitors include people doing their own hand wash and new washing machines with specialized cycles for delicate clothing.
To figure out who your indirect competitors are, ask yourself who or what your target market turns to—other than you or your direct competitors—in order to solve the core challenge your product or service solves. The mental exercise of determining who your indirect competitors are is a critical one. All too often we see businesses direct their limited marketing resources (i.e., time and money) to luring customers away from their direct competitors, when sometimes it’s much cheaper to acquire a customer that no one currently has. Sasha, for example, can focus her energy on getting the woman who does her own hand wash at home as her next customer, as opposed to targeting the customer who is currently loyal to the dry cleaner down the street. Who or what are your two main indirect competitors? What are the biggest advantages for someone using these indirect competitors? What are their most glaring deficiencies or weaknesses? What is the best way you can position your company, product, or service relative to them to outshine them?
Step back from your business for a moment.
In your worst nightmares, who or what could totally change the way the game is played in your industry?
Think of what Apple did to the music industry with iTunes, what Amazon did to brick-and-mortar retailers, or what FedEx did to the U.S. Postal Service.
Many businesses fail to spot a disruptive competitor in their industry because they put blinders on and choose not to see it. They have so much invested in the status quo that it warps their perceptions and thinking process.
A big part of identifying disruptive competitors is watching for trends and new technologies that aren’t even being used in your industry—yet.
For example, with Sasha’s dry-cleaning business, potential disruptive competitors could be fabric manufacturers who create a memory fabric that allows people to machine-wash dress clothing, which then pops back into its pressed shape. Or an ionization machine from a different industry that could be applied to dry cleaning that totally eliminates the need for solvents or chemicals.
Who do you think your two biggest potential disruptive competitors could be? What might it look like if they made a move into your niche? What steps you could take now to preempt or undercut these moves?
It doesn’t matter that you have the perfect answers to these questions; for now, it is enough that you train yourself to consistently ask the questions.
Building Your Competitive Matrix
We’ve got one last step—to map out, in one simple chart, how you stack up against your competition. We call it your Competitive Matrix. This chart asks you to fill in your top three direct competitors, your top two indirect competitors, and your two scariest potential disruptive competitors. Then, rate your business and that of your competitors on the eight variables (e.g., price, value, service, etc.) listed on a scale of 1 to 5, with 5 being the highest score possible. For example, if your company is very attractive on price to your target market, then rate yourself a 4 or 5. If your brand is very weak (not well known in the market, has a poor reputation, etc.), then you might rate it a 1 or 2, and so on. When completed, this matrix will offer a clear side‑by‑side comparison between you and your competition.
At this point, what matters is understanding where you stand relative to your competitors, not that you outshine each of them on every variable (which usually isn’t possible anyway). If you know that competitor A is significantly less expensive, then competing on price would likely be a mistake. Instead, you may decide to compete on service, quality, or brand. This is why we are asking you to lay out a visual view of the competitive playing field. You can use this information to pick the one variable that not only matters to a large enough subset of your target market, but is also the one in which you can trounce your competitors. Having laid out your Competitive Matrix, it’s time to turn to the final dimension of your business context—your positioning.
Your market position is made up of two closely related elements: your chosen “parking space” and your brand. Your parking space is the intentional way you have positioned your company (or its products or services). It is the frame of reference through which you want your market to see you. Your brand, on the other hand, is the emotional shortcut you’ve helped your market develop that links your company, products, or services to a specific emotional response. Your brand becomes a filter that colors how your market interprets each of its interactions with you. Both your parking space and your brand are two pieces of the same puzzle, and are critical for your business to successfully scale. Let’s look at them in detail.
The Parking Space Theory of Positioning
The easiest way to think about strategically positioning your company is using a simple analogy we call the “Parking Space Theory of Positioning.”
Imagine driving into a parking lot, looking for a space to park your car. What would you look for?
An open space, of course!
Theoretically, you could move a car out of an existing space so you could park your car there, but that would require quite a bit of muscle power to do.
The same concept applies when you are looking for the right space in which to position your business in the marketplace. You should look for an open parking space.
The right parking space for your company lies at the intersection of three factors: your company’s biggest strengths (your parking space must rely on what you do really well); your market’s deepest desires around your type of product or service (it must be something that your market values); and the open spaces your competitors don’t already own in the mind of your market (it is very expensive to move another company out of a space if they truly already own it).
Your “parking space” is the heart of how you position your company, and its products and services, to be seen by your target market. It represents the single thing you want to be known for— more than anything else.
Here are several examples with well known companies and products:
- Walmart (“Lowest prices” parking space)
- Bayer Aspirin (“Gentlest aspirin on your stomach” parking space)
- Volvo (“The Safest” parking space)
- Prego Spaghetti Sauce (“Thickest spaghetti sauce” parking space)
- Zappos (“Best customer service” parking space)
- Amazon (“Easiest place to buy online” parking space)
- Priceline.com (“Lowest-priced discount travel” parking space)
Why is it so important that you be known for a single thing? After all, you may say you are both the low-cost provider and have the best service in your market—oh, and your product is the best quality too. Why can’t you be known as the “lowest price, best service, highest quality” provider? As soon as we spell it out like that, it becomes obvious how watered down and confusing this will likely prove to your market. It’s hard enough to own any one thing in the minds of your market, let alone two or three things. Yet if we look at marketing materials for a group of small businesses (e.g., websites, sales brochures, advertising, sales scripting, etc.), many are pushing multiple positions at the same time. And their materials probably don’t look all that different from their competitors’. Sound familiar? One of the things we tell the businesses we work with is that in order to achieve exponential success, you need to win a gold medal in something. You need to find a category in which you can truly win—so that you can stand out in your marketplace. Picking your parking space carefully is a critical long-term decision.
Pick Your Parking Space
Here is a short series of questions to help you triangulate and pick the best parking space for your business:
- What are your company’s top three to five strengths that create value in the market? These should be things that set you apart, or potentially could set you apart from your competition. Does your cost structure allow you to price more attractively than your competitors? Is the technical expertise of your client support team or credibility of your company unique in your market? Just because a parking space is empty doesn’t mean it’s necessarily a good choice for you and your company. You have to be able to truly deliver on the promise of that space.
- What are the top three to five things that a sizable chunk of your target market values highly with respect to your type of product or service? What are the key factors that your market wants in your product or service that would trigger them to buy? Is it the speed of delivery? Flexible payment options or financing to make it more affordable? Ease of use?
- Which parking spaces (best price, best quality, best service, easiest to use, most environmentally friendly, etc.) are empty and not already “owned” by one of your competitors? If you aren’t sure if someone owns a specific parking space in the minds of your market, likely no one does. A simple test to determine this is to ask ten prospects in your target market which company (or product or service) comes immediately to mind when they think about _______ (fill in the blank with the parking space you’re curious to see if someone owns). If all ten prospects say the same company delivers the best prices on dry cleaning, for example, then that parking space has a competitor parked in it. If they each have a different answer, or better yet, no single company comes to mind for them, then likely no one is parked in that space and it is potentially open for you to claim.
Now that you’ve listed the three sides to the parking space triangle, determine which parking space you can claim that leverages one of your business’s key strengths, delivers a benefit that your market values highly, and is not already occupied by a competitor. The goal behind this parking space exercise is to carve out the one singular space where you can beat your competition by doing something you are very good at for a set of customers who will love you for doing it and pay you well. Now it’s time to turn our attention to a closely related subject— branding.
Branding in the Real World
Your brand is simply the emotional associations and gut-level “sense” of how your company, product, or service is intuitively perceived by your market. If your “parking space” is about choosing the one single element you want to relentlessly burn into the minds of your market so that they’ll automatically associate your company with that space, then your brand is the broader emotional response that instantly springs to mind when someone in your market imagines what it will be like to interact or work with your company.
The easiest way to make branding real is to determine what we call your top three “brand emotions.” We’ll walk through exactly what this means in just a moment, but first let’s quickly turn to the biggest branding mistakes we’ve watched small and midsize businesses make.
THE THREE BIGGEST BRANDING MISTAKES
- They’ve never given any real thought to their brand or market positioning. They have no real strategic understanding of how they are perceived or how they ideally want to be perceived.
- They regularly do things that contradict or water down their brand because they are not congruent with their desired brand.
- If they have given thought to the brand they want to embody, they lack a clear, practical understanding of how to take this idea and translate it into how they do business. Their branding all feels theoretical and academic.
Your brand is the sum total of the emotional, mental, and experiential associations your marketplace has to your company and offerings. The reason brands work is that they help people quickly make meaning out of the world. The value of your brand is in direct relationship to how valuable the market judges your promise, and how much people trust your company to keep its “brand promise,” the informal contract you’ve made with the market to offer a reliable and consistent experience when interacting with or buying from your company. To make this concept actionable and intuitive in your business, think about your brand promise as a set of three core emotions that you want your market to experience after every interaction they have with your business. We call these three core emotions your “brand emotions.” Here are a few examples of various well-known companies and their brand emotions.
- Sheer pleasure. (“It is a joy to handle and touch these devices.”)
- Cool. (“When I own and pull out my iPhone, I feel cool and hip.”)
- Smooth and easy. (“They just work and are so intuitive to use.”)
- Well served. (“They really do take care of my needs.”)
- Great value. (“I know I got a great deal.”)
- Fun. (“Interacting with Virgin is fun.”)
- Luxurious. (“It just feels so rich to be riding in this car.”)
- Status. (“I feel more important when people see me in this car.”)
- Trust. (“I know I can rely on the car and the dealer to serve my needs.”)
What about your business? What are the top three brand emotions that you want your market to experience after every interaction with you? Now comes the breakthrough part—making your brand emotions real in your market.
People evaluate a business’s performance on its brand promise by applying a powerful quirk of human nature called inductive perception.
Inductive perception is a thinking shortcut where a person takes a relatively small sample size of experience and makes that small experience stand for the broader whole.
Understanding that people take symbolic slivers of their experience and inductively expand what they mean by generalizing outward, you can intentionally design your market’s interactions with your business to increase the odds that they’ll feel your brand emotions. The more consistently you help your client or market feel your brand emotions after they interact with you, the stronger your brand is with those people. Now, how to do that in the real world? Go back to your brand emotions. Think of simple things you can do to design your client experience so that your client is more likely to feel one or more of your brand emotions.
For example, if you owned a Lexus dealership, you could look for simple ways to enhance a customer’s sense of status the moment they walked on the lot. You could have them call all staff on the lot by their first name, while your staff would still address the customer as Mr. or Ms. (putting the customer up on a pedestal emotionally). If they needed to get their car fixed, you could help them arrange a “service appointment.” You could sponsor high-end arts events and invite your customers. You could even give customers a visible luxury gift like a watch or fancy key chain, to extend the feeling of high status into their lives outside of their car.
Add Brand Emotions To Your Customer Experience
Select one of your brand emotions and brainstorm possible ideas—large and small—that you could concretely design into your customer experience to prompt them to feel that brand emotion. Now go on to the second and then third of your brand emotions and ask yourself the same question. When you’re done, choose from the ideas you’ve come up with to implement in your business. (In the next chapter, we’ll share with you a powerful strategic tool called the “Sweet Spot Analysis” that you can use to pick the best of your ideas to implement.)
The Two Most Important “Reality Checks” for Your Brand
Now we come to the final two reality checks to your company’s brand.
First, just because you say it’s so, doesn’t make it so. Your clients ultimately determine your company brand by an accumulative process. Once you’ve been labeled by the market, it’s very hard to stray too far from it. You can tweak it, twist it, and bend it, but rarely break it. You’re almost better starting fresh and creating a new brand. If you are being brutally honest right now, how does your market currently see your company brand?
Second, your brand emotions must be meaningful and real inside your company or they won’t last. Smoke and mirrors are great in a stage production but do not last long in the market. You’ve got to get the substance of your brand emotions into the way your company sees itself and its mission. Your team needs to understand how it is everyone’s job to reinforce your brand emotions any way they can. For your brand emotions to be real for the long term, your entire team has to live your brand every day, in every way. That means being consistent in every touch point and every interaction with a client, whether it’s a phone call, in-person conversation, email, or advertisement. A brand can really only achieve its goal when it’s consistently applied by everyone at your company, in everything they do. Unfortunately for too many companies, “brand” is just an external marketing message and, internally, merely a poster on the wall. The world’s best companies actually do live their brand every day, in everything they do. Remember Zappos? They made the huge decision to build their brand around one powerful brand emotion: delivering happiness. And they’re extremely committed to following through on making sure you leave happy when you interact with them.
It All Starts with Your Customer
The place to start is with your customer. Let your customer’s needs, desires, fears, and aspirations deeply impact how you run your business. Once you have a clear understanding of whom you are serving and why they choose to do business with you, review your competition. Take the strategic insights found by looking at your Competitive Matrix and use them to help you sharpen your positioning. While you may never nail your parking space and branding as effectively as Zappos does, you can make real improvements that will help you sustain your growth.
Action Steps – What To Do Now: